Friday, September 28, 2007

Looking back at Augusts’ results (released throughout September) it now appears that the nation’s housing markets, having been dramatically and irreparably damaged by the mortgage-credit debacle, are now hurling headlong into a dramatic new leg down.

Housing demand’s slowing is accelerating, inventories continue to climb far beyond historic levels, homebuilders have entered “fire sale” mode, Jumbo and No-Doc loans for any borrower have effectively disappeared, and the federal government has just begun to recognize the severity of the issue.

Pending home sales showed a truly stark and horrendous continuation of the historic decline to residential housing on a month-to-month and year-over-year basis, both nationally and in every region.

The Northeast, Midwest, West and the National regions have now fallen WELL BELOW 100 indicating that, seasonally adjusted, home sales activity was below the average activity recorded in 2001, the first year Pending Home Sales were tracked.

The housing weakness seems to continue to contribute to a pullback in the retail sales of discretionary goods although the near perfect correlation present earlier in the year has begun to decouple. I’ll have a completely new post dedicated to analyzing this correlation in more detail later in October.

The Census Department’s New Residential Construction report which continues to indicate troubling weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.

Topping the list of decliners on a year-over-year basis was Detroit at -9.69%, Tampa at -8.77%, San Diego at -7.78%, Phoenix at -7.30, Washington DC at -7.22%, Miami at -6.14% and Las Vegas at -6.14.

NAR’s Existing Home Sales Report showing additional confirmation that the nation’s housing markets are now entering a new leg down with EVERY regions showing considerable declines to sales of BOTH single family and condos as well as significant increases to inventory and monthly supply

The final GDP report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.

The Census Department’s New Residential Home Sales report for August that again confirmed the hideous falloff in demand for new residential homes as well as reporting a 7.5% decline to the median sales price and significant downward revisions to June and July’s results.

As with prior months, on a year-over-year basis sales are still declining significantly dropping a truly ugly 21.2% below the sales activity seen in August 2006.

The Census Department’s Construction Spending report for August again demonstrated the significant extent to which private residential construction spending is contracting.

With the weakening trend continuing, total residential construction spending fell -16.52% as compared to August 2006 while private single family construction spending declined by a grotesque -25.64%.

Key Report Details:

The seasonally adjusted annul rate of private residential construction spending has now dropped 24.99% from the peak set back in February 2006.

Thursday, September 27, 2007

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for August that again confirmed the hideous falloff in demand for new residential homes as well as reporting a 7.5% decline to the median sales price and significant downward revisions to June and July’s results.

As with prior months, on a year-over-year basis sales are still declining significantly dropping a truly ugly 21.2% below the sales activity seen in August 2006.

It’s important to keep in mind that these declines are coming on the back of the significant declines seen in 2006 further indicating the significance of the housing bust.

The following charts show the extent of sales declines seen since 2006 as well as illustrating the further declines 2007 is showing on top of the 2006 results (click for larger versions)

Note that the last chart essentially combines the year-over-year changes seen in 2005 and 2006 and shows sales trending down precipitously as compared to the peak period.

Look at the following summary of today’s report:

National

The median price for a new home was down 7.5% as compared to August 2006.

New home sales were down 21.2% as compared to August 2006.

The inventory of new homes for sale declined 6.9% as compared to August 2006.

The number of months’ supply of the new homes has increased 20.6% as compared to August 2006.

Regional

In the Northeast, new home sales were down 14.0% as compared to August 2006.

In the West, new home sales were down 16.0% as compared to August 2006.

In the South, new home sales were down 27.1% as compared to August 2006.

In the Midwest, new home sales were down 11.2% as compared to August 2006.

As many of you already know there is a very juicy loophole in the federal tax code that allows for a gargantuan exclusion ($250,000 for a single homeowner, $500,000 for a couple) of the gain from the sale of a principle residence from traditional taxation, so long as the taxpaying homeowner had used the property as a primary residence for an “aggregate” of 2 years of the 5 years prior to the sale.

The “aggregate” language in the tax code is important as it allows for the flexibility of using the property for other purposes (such as a vacation home or a rental property) during the 5 years prior to the sale but still meet the residency requirement as long as the time the property had been used as a primary residence totals 2 years.

To say that this WAS an important tax loophole for lower to middle income as well as affluent homeowners is an understatement as the notion of such a large tax free capital gain likely greatly contributed to the excitement seen in residential real estate since the loophole was passed into law back in 1997.

The proposed changes that ironically ride along within the “Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648)” bill that was requested by President Bush in response to the subprime mortgage debacle, appears to eliminate the tax break for any gain associated to the periods where the property is NOT used as a primary residence.

The bill achieves this feat by introducing the notion of a “period of nonqualified use” which is defined as any period that the homeowner or spouse does NOT use the property as a primary residence.

The bill goes on to propose an exception that, while puzzling and poorly designed, appears to grant an exception to all periods of “non qualified use” that occurs AFTER “qualified” period of primary residency within the final 5 year period prior to sale.

By this they may possibly mean that after an initially fully qualified primary use, i.e. 2 years or primary residency, any "nonqualified" use occurring within 5 years prior to sale would be considered "qualified"

So, in general, come the effective date of January 1 2008, all gain from periods where a property is squarely a second home, be it vacation or investment, will be taxed.

It's important to note that the proposed changes are, in effect, being established exclusively to provide tax revenues needed make up the shortfall derived from the bills primary goal of tax relief for homeowners who had a portion of their housing debt forgiven in lieu of foreclosure.

Keep in mind though that the proposed changes have simply been unanimously agreed upon by the House Ways and Means Committee so there is still the House passage, Senate proposed legislation and passage, reconciliation and of course President Bush’s signature standing in the way of these changes becoming law.

On a side note, one of the authors of the current bill threw in a totally unrelated change to the tax law regarding the time of payment for corporate estimated taxes… isn’t it just lovely how the government works?

Today, the Bureau of Economic Analysis (BEA) released their third and final installment of the Q2 2007 GDP report showing the revised growth rate of 3.8%, buoyed by strength in nonresidential structures and federal, state and local government spending, a decline in imports while continuing to be weighed down by weakness to fixed residential investment.

Residential fixed investment, that is, all investment made to construct or improve new and existing residential structures including multi–family units, continued its historic fall-off registering a decline of 11.8% since last quarter while shaving .62% from overall GDP.

Housing continues to be, by far, the most substantial single drag on GDP subtracting an amount greater than the contributions made by all exports of goods during the quarter.

Along with MARs release, President Doug Azarian continued the typical spin suggesting that the Federal Reserve’s rate cuts and government intervention into the nation’s housing markets will immediately translate to positive growth.

“It is definitely a positive sign to see two consecutive months of year-over-year sales gains to end the summer … Combined with the recent interest rate drop by the Fed and continued legislative action on Capitol Hill, the potential for continued sales growth through the fall is good.”

As usual, The Warren Group’s latest figures were significantly different than that of MARs showing sales down 1.5% and a median price decline of 4.9% as compared to August of 2006.

I think it’s safe to say that we are at a literal crossroads in terms of information and perception.

First, as you may already know, I believe the MAR numbers are truly untrustworthy.

There have been numerous flaws in past reports with unexplained and conflicting revisions as well as simply the inconsistency that has been shown when comparing MARs results with both the Warren Group and the Case-Shiller data.

That said, I do believe that this selling season showed some positive trends with inventory falling significantly and sales, while slowing, generally keeping pace, or at least not collapsing, as compared to last year.

Additionally, although the S&P/Case-Shiller index for Boston has historically showed a strong degree of seasonality with prices generally increasing as sales volume increases between February and July and then slowing toward the end of the year, this year’s seasonal upward price movement has looked much like any other year also without any collapse.

Lastly, while the Warren Group’s numbers are clearly more accurate than MARs and have generally showed greater sales declines as well as median price declines in-line with the S&P/Case-Shiller, they have not indicated any truly cataclysmic collapse.

By collapse what I’m suggesting is something on the order of the “bottoms away” declines seen during the last housing recession where prices literally dropped off a cliff and fell consistently for roughly two straight years.

Now keep in mind, the most significant structural change for our areas housing market, namely the disappearance of the Jumbo and No-Doc loan, JUST OCCURRED in August and none of the data that we have seen to date accurately reflects the impact of that change.

We are now clearly at a crossroads with the shape and movement of this downturn diverging from what we have experienced in the past and now firmly on its own course.

In fact, you can clearly see the divergence in both of the “then and now” charts I have published in prior posts (see below).

So what’s next for Boston housing?

I think it would be very unlikely that the developments in the mortgage market would have no impact on sales and prices in our area.

I am firmly convinced that prices will reflect the extraordinary changes that have taken place and the adjustment will not be short lived.

Whether this price adjustment occurs slowly over time, buoyed by a relatively strong economy and job market or whether we head for recession and real housing distress is yet to be determined but my money is on significant adjustment one way or the other.

To better illustrate the drop-off in home prices and the potential length and depth of the current housing decline, I have compared BOTH the year-over-year and peak percentage changes to the S&P/Case-Shiller home price index for Boston (BOXR) from the 80s-90s housing bust to today’s bust (ultra-hat tip to the great Massachusetts Housing Blog for the concept).

The “year-over-year” chart compares the percentage change, on a year-over-year basis, to the BOXR from the last positive value through the decline to the first positive value at the end of the decline.

In this way, this chart captures only the months that showed monthly “annual declines” and as we can see, if history is to be a guide, we could be about one third of the way through the annual price declines with the majority of falling prices yet to come.

The “peak” chart compares the percentage change, comparing monthly BOXR values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 105 months (almost 9 years) peak to peak including 34 months of annual price declines during the heart of the downturn.

Notice that peak declines have been more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.

As in months past, be on the lookout for the inflation adjusted charts produced by BostonBubble.com for an even more accurate "real" view of the current market trend.

Augusts’ Key Statistics:

Single family sales increased 6.6% as compared to August 2006

Single family median price increased 1.4% as compared to August 2006

Condo sales increased 3.4% as compared to August 2006

Condo median price increased 4.8% as compared to August 2006

The number of months supply of single family homes stands at 8.2 months.

The number of months supply of condos stands at 7.4 months.

The average “days on market” for single family homes stands at 127 days.

The Mortgage Bankers Association (MBA) publishes a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage increased since last week and now stands near the peak for the year at 6.38% while the purchase volume decreased 7.3% and the refinance volume increased 3.3% compared to last weeks results.

It’s important to note that the data is reported (and charted) weekly and that the rate data represents average interest rates, and the index data represents mortgage loan application volume for home purchases, home refinances and a composite of all loans.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since January 2007.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since January 2007 (click for larger versions).

Senior Economist Lawrence Yun is now left to simply state to obvious for risk of looking completely uniformed and off base.

“The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales, with many buyers having to search for other financing when loan commitments fell through, … Lower sales contributed to a buildup of unsold inventory.”

Additionally, NAR President Pat Vredevoogd Combs make a truly absurd attempt to spur on buyer activity by spinning the bad news and even calls a bottom to the mortgage turmoil.

“Mortgage interest rates have been declining and loan availability is improving… Movements to enhance the FHA loan program and to raise the limits for conventional financing could provide additional relief, and it looks like the worse of the mortgage availability problem is behind us.”

Looking at August's Existing Home Sales report should only result in additional confirmation that the nation’s housing markets are now entering a new leg down with EVERY regions showing considerable declines to sales of BOTH single family and condos as well as significant increases to inventory and monthly supply.

Keep in mind that we are now seeing existing home sales declines on the back of last years fairly dramatic declines further indicating that the housing markets are not bottoming as many had been suggested last fall.

Below is a chart consolidating all the year-over-year changes reported by NAR in their August 2007 report.

Particularly notable are the following:

Sales are down significantly in EVERY region and for BOTH single family and condo.

ALL Inventory and Months Supply show significant increases on a year-over-year basis.

The most recent release of the S&P/Case-Shiller home price indices for July continued to show weakness for the nation’s housing markets with 15 of the 20 metro areas tracked reporting significant declines.

Topping the list of decliners on a year-over-year basis was Detroit at -9.69%, Tampa at -8.77%, San Diego at -7.78%, Phoenix at -7.30, Washington DC at -7.22%, Miami at -6.14% and Las Vegas at -6.14.

Additionally, both of the broad composite indices showed accelerating declines slumping -4.52% for the 10 city national index and -3.91% for the 20 city national index continuing the first negative slump in annualized appreciation seen since the early 90’s housing bust.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What’s most interesting about this particular comparison is that it highlights how young the current housing decline is, having only posted four consecutive year-over-year (YOY) monthly declines to home prices.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are only ten months into a decline that, last cycle, lasted for roughly fifty four months during the last cycle (click the following chart for larger version).

The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Notice that peak declines have been FAR more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.

Monday, September 24, 2007

On several occasions now, including as recently as last Thursday’s hearing in front of the House Financial Services Committee, Housing and Urban Development Secretary Alfonso Jackson has explicitly stated that administration policy is not intended to help so called “Yuppies”.

Yet, with their now uniform acceptance of the “temporary” conforming loan limit increase, that’s exactly Senator Schumer, Representative Frank and a reluctant Bernanke, Paulson and Jackson seem bent on doing.

“We have very educated people that decided that they wanted to live above their means, and we call them yuppies… young people who wanted a Mercedes Benz but at the same time wanted a $600,000 home. So, they go in and make a loan that is basically interest only wake up the next morning and they can’t cover the note because the house has not increased [in value]… In those cases, we are not willing to bail those people out. But low and moderate income people, fireman and police who didn’t read the fine print, we will be able to help them stay in their home.”

“Let me say this to you mister chairman, clearly there are some people that we are not going to be able to help. Especially, as I always say, the yuppies who had this extravagant decision to have two or three cars, and a huge house they can’t afford but the people we are looking at are basically middle income people, fireman… police, teachers, nurses.”

So, I would think the point has been made very clearly… No Yuppie Bailout!

Yet, with the proposed conforming loan limit increase to $625,000 for the more expensive “urban” areas, it’s obvious that, by its definition, the yuppie and his or her lender is being bailed out.

Who else lives in the expensive metro markets and borrows $625,000 toward their home purchase anyway… fireman, police and nurses?

Friday, September 21, 2007

There were a lot of really great and informative video segments this week covering topics ranging from the Fed’s effectiveness and the outlook for inflation to regional accounts of housing stress to the forthcoming emergency actions by the federal government in response to the calamitous fall off in the housing and mortgage markets.

First, in one of the numerous Greenspan interviews this week, the former Federal Reserve Chairman suggested that we are now beyond the era of favorable interest rates and further that the 10 year note will be heading up to 8%.

In an interview with a somewhat ornery but VERY informative Jim Rogers of Beeland Interests, Rogers suggests that the Fed is irrelevant in that they, in his view, generally move after market turmoil has occurred. Rogers also points out astutely that the current market conditions shouldn’t qualify as being termed a “crisis” the as all the major indexes are only 4% – 6% below their all time highs.

In an EXCELLENT and complementary segment to the prior Rogers piece, Marc Faber of the Gloom, Boom and Doom Report joins Bloomberg to discuss his predictions for the latest Fed actions and his assertion that the US economy is already in recession. Although Faber believes that the Fed will cut interest rates, he suggests that the better move would be to actually raise them in order to fulfill their real role of maintaining the integrity of money.

Yale Professor Robert Shiller joins CNBC to discuss the latest Fed action and his outlook for the future of housing and the economy. Shiller states that given the nature of the fallout of the credit market turmoil, namely the money market instability and the bank run in the UK, economists generally believe that the Fed’s 50 basis point rate cut was “entirely reasonable and not an aggressive cut”.

In a particularly icky segment, Bloomberg chronicles some of the truly ugly fallout currently being experienced in California’s “Inland Empire” including foreclosure homes breeding pathogen laden mosquitoes in their stewing backyard pools, 25% home price declines, job losses and families downsizing to mobile home parks.

Next, this segment chronicles a tough story of a homeowner that purchased an expensive home (over the conforming limit) with a 2 year adjustable loan and now after a $700 reset, is straining to make it.

Thursday, September 20, 2007

A reader recently commented that by advocating the position of allowing the housing markets to play themselves out unfettered from government intervention, I was taking a “black and white” view of “free markets” and essentially supporting a financial seizure.

Furthermore, the commenter pointed to the bank run in the UK and further suggested that inaction would lead to a violent downward spiral inevitably resulting in a titanic market crash, worthless currency, bread lines, the breakdown of civility and finally chaos in the streets.

Although I do have a fondness for the taste of human flesh, I’d like to challenge this contention ever so slightly.

First, I think favoring government intervention in the unwinding of the national housing bubbles is actually the more “black and white” perspective as it assumes a measure of certainty about the legitimacy of the action, its effectiveness and more importantly that, through its implementation, greater harm is not being done.

We have to first accept that the housing-lending boom has significantly overpriced residential housing, particularly in the metro areas, and that this mispricing will correct one way or the other.

You don’t have to take my word for it, every conceivable measure of sales, values, mortgage equity withdrawal, homeownership rates, second home ownership rates, homebuilder sentiment, construction activity, realtor membership, and finally a host of popular culture phenomena like “flipping” television entertainment supports the notion that we have just experienced an anomaly of epic proportions.

The correction is upon us but our economy, I believe, is large enough and dynamic enough to resolve the correction without causing actual Armageddon.

By taking intrusive actions, such as allowing Fannie and Freddie to become Jumbo loan lenders, the government would essentially be attempting to fill the vacuum vacated by astute market participants, in an effort to help blunt some of the downside.

But mightn’t those participants vacated for a reason?

Is it sensible for the government to attempt to resume orderly operations of an aspect of a market that the market itself has deemed too risky?

Furthermore, while I do think we are headed for a hard recession as a result of the unwinding of the housing-lending debacle, I can’t imagine that it is constructive to dwell on the worst possible outcome when weighing the costs and benefits of government actions.

Could the coming recession run deep and be widely felt with significant shakeout of sentiment and pullback in consumption?

Wednesday, September 19, 2007

“Everything that has transpired has done so according to my design. I wonder if your feelings on this matter are clear, Lord Inflator.”

It should be obvious to all today that the Federal Reserve and Ben Bernanke actually intend on attempting to “prevent” the “housing correction” from intensifying and impacting the broader economy.

This seems to foretell a strategy that, although may appear perfectly justified from the standpoint of an observer who generally believes the housing correction will be mostly contained, may actually be the worst possible action should things continue to worsen.

I believe the 50 basis point rate reduction is simply another, albeit significant, example of the Fed simply underestimating the nature of the housing crisis and its potential for long term harm to the economy.

By taking this action now, the Fed is clearly attempting to relieve the recent fear and anxiety of the markets in an effort to restore order in an economy that they generally believe “seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.”

But if the housing decline is a much more fundamental process then the Fed anticipates, taking many more years to play out, is it really sensible for them to attempt to “forestall” the effects now, especially given that hardly any real effects have been felt?

I think it would have been wiser to allow the housing recession to play out longer, free from intrusive actions, with the confidence that, although the efficiency of the markets will result in creative destruction of wealth and households, the speed of the correction would be swift and certain leaving the economy better prepared to expand out of the aftermath.

By taking these actions, and likely more like them in the future, the Fed may cause the housing correction to be draw out, with multiple failures and false bottoms, causing a slow bleed that could last for many years to come.

It’s an ironic twist that in an era when Japan is desperately attempting to adopt a modern American economic model, we may well be, in fact, adopting Japans model of the past.

Today’s New Residential Construction Report continues to indicate troubling weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.

Single family housing permits, the reports most leading of indicators, again suggests extensive weakness in future construction activity dropping 27.9% nationally as compared to August 2006.

Moreover, every region showed high double digit declines to permits with the West declining 31.8%, the South declining 30.8%, the Midwest declining 20.5% and the Northeast declining 10.2%.

Keep in mind that these declines are coming on the back of last year’s record declines.

To illustrate the extent to which permits and starts have declined, I have created the following charts (click for larger versions) that show the percentage changes of the current values compared to the peak years of 2004 and 2005.

Notice that on each chart the line is essentially combining the year-over-year changes seen in 2005 and 2006 and shows virtually every measure trending down precipitously.

Although year-over-year declines to permits, for example, have not accelerated measurably from September 2006, the fact that they continue to decline roughly 20%-30% should provide a solid indication that they are by no means stabilizing.

Remember that permits, starts, and completions are not simply independent measures but are, in fact, three logically related and dependent measures.

In the process of a building project, first you get the “permit”, next you “start” building, and finally you “complete” the project.

For this reason, one must adjust expectations prior to reading a newly released Census Department report to account for the true nature of the data published simultaneously each month.

As in past months, I have “smoothed” out the unadjusted data and aligned the three data series (i.e. moved starts ahead a month and completions ahead six months) to make more obvious their trend.

Here are the statistics outlined in today’s report:

Housing Permits

Nationally

Single family housing permits down 27.9% as compared to August 2006

Regionally

For the Northeast, single family housing down 10.2% as compared to August 2006.

For the West, single family housing permits down 31.8% as compared to August 2006.

For the Midwest, single family housing permits down 20.5% as compared to August 2006.

For the South, single family housing permits down 30.8% compared to August 2006.

Housing Starts

Nationally

Single family housing starts down 27.1% as compared to August 2006.

Regionally

For the Northeast, single family housing starts down 37.3% as compared to August 2006.

For the West, single family housing starts down 32.4% as compared to August 2006.

For the Midwest, single family housing starts down 14.4% as compared to August 2006.

For the South, single family housing starts down 26.6% as compared to August 2006.

Housing Completions

Nationally

Single family housing completions down 23.3% as compared to August 2006.

Regionally

For the Northeast, single family housing completions down 8.8% as compared to August 2006.

For the West, single family housing completions down 19.2% as compared to August 2006.

For the Midwest, single family housing completions down 46.0% as compared to August 2006.

For the South, single family housing completions down 19.0% as compared to August 2006.

Keep in mind that this particular report does NOT factor in the cancellations that have been widely reported to be occurring in new construction.

The Mortgage Bankers Association (MBA) publishes a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage increased since last week and now stands near the peak for the year at 6.29% while the purchase volume increased 0.9% and the refinance volume increased 4.6% compared to last weeks results.

It’s important to note that the data is reported (and charted) weekly and that the rate data represents average interest rates, and the index data represents mortgage loan application volume for home purchases, home refinances and a composite of all loans.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since January 2007.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since January 2007 (click for larger versions).